It looks like we’re a nation of savers, with one in three Australians planning to save their tax refund. It’s a smart move, but there are plenty of other ways to supersize the value from your tax refund. The big questions is what do you do with your refund? According to Finder research, 31 per cent of us will save the cash, and 10 per cent will use it to pay a bit extra off their mortgage. These are both sensible strategies. However, with interest rates so low on deposit accounts and home loans, there are other ways to use a tax refund.
If you’re carrying a high interest credit card debt, it can be worth using your refund to pay down the balance. Another option is to boost your super with a personal after-tax contribution. Or, if in a relationship, consider making a contribution to your other half’s super fund. You could be eligible for the 18 per cent spouse super tax offset worth up to $540.
Since July 1 the spouse super offset is available if your spouse or partner earns up to $37,000 annually. That’s a big increase on last year’s income threshold of $13,800, and an easy way to boost your combined retirement savings and get a decent amount of tax back next year.
Your tax refund can also be a source of cash to take out income protection insurance. This type of cover provides replacement income usually worth around 75 per cent of your current wage or salary if you can’t work due to illness or injury. The beauty here is that the premiums are normally tax deductible, meaning you could enjoy a healthy refund again in 2018.
Make putting your tax refund to work an annual habit.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.